The Surat Bench of the Income Tax Appellate Tribunal ( ITAT ) upheld the decision of the Commissioner of Income Tax (Appeals) [CIT(A)], who deleted the addition of Rs.3.53 crores on Assessee’s return of income for the assessment year(A.Y) 2015-16, made by the Assessing Officer ( AO ) on account of an unexplained unsecured loan u/s 68 of the Income Tax Act,1961.
In the case, The Revenue Department filed an appeal challenging the order made by the CIT(A) On 13/12/2023, who revised the order of the AO with a deletion of Rs.3.53 crores levied on Mahavir Corporation, the assessee. Such deletion was because unsecured loans received in earlier years cannot be taxed in the current assessment year.
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At the assessment, the AO noted that the assessee had shown an unsecured loan of Rs 4.96 crores. Since the assessee furnished a reply that did not provide an explanation or evidence for the sum, the AO ordered the addition of Rs.3.56 because the unsecured loan was genuine u/s 68 of the Act. Aggrieved by the additions, the assessee filed an appeal before the CIT(A).
In their written submissions, the assessee held that most loans were received in earlier years, and the loan increase is only due to interest application. To prove the genuineness of the loan, the assessee submitted a copy of the ledger account and confirmation of various parties. The assessee asserted that the loans were evident in the 2013-14 audit report, which is already on record.
On considering the submission, the CIT(A) held that out of the total loan of Rs. 4.96 crores, the old loan adding up to 3.56 crores cannot be held as it is duly reflected in the audited balance sheet. An addition based on such a loan cannot be made u/s 68 of the act in the assessment year under consideration. The CIT(A) held that adding up to Rs.1.42 crores is possible as it amounted to the sum of the loan incurred in the current year.
Dissatisfied with the order for deletion by the CIT(A), an appeal was filed to the ITAT by the revenue department. The Commissioner of Income Tax-Departmental Representative ( CIT-DR ) submitted that the CIT(A) accepted the additional evidence without satisfying the scope of Rule 46A of the Rules. The assessee was given full opportunity during the assessment; however, the assessee should have discharged his burden in showing the genuineness of such a loan. During the appellate stage, the CIT(A) accepted the additional evidence and deleted the interest expenses disallowance and the addition of a loan under Section 68 of the Act.
Comprehensive Guide of Law and Procedure for Filing of Income Tax Appeals, Click Here
The Authorized representative for the assessee countered such submission, stating that the assessee furnished details of loans taken in earlier years that could not be added under Section 68 in the year under consideration as the loans were evident in the audit report for A.Y. 2013-14, which was already on record, and CIT(A) made such a decision based on this fact.
The ITAT, comprising Pawan Singh ( Judicial member ), held that CIT(A) decided on such deletion based on verifying a basic fact: most of that loan was received in earlier years. It was reflected in the audited accounts of those assessment years, and no alternative decision was taken in those years, thereby making such transactions legitimate. Based on this ground, the ITAT dismissed the appeal of revenue.
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